Monday, 12 August 2013 00:11
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By Wealth Trust Securities
Activity in secondary bond markets dried up considerably during the shortened week mainly due to an unexpected increase on the 364-day bill weighted average (WAvg) at the weekly auction.
The downward trend in WAvg’s at the weekly auctions over the past few weeks was reversed for the first time in 11 weeks as the WAvg on the 364-day bill edged up by 5 basis points to 10.57%. This caused yields on maturities below the one year bill to increase as well as selling pressure set in.
However, the upward trend was negated marginally due to the favourable four year bond auction which resulted in a WAvg rate of 10.87%. The yields on the liquid two five year maturities (i.e. 1.4.2018 and 15.8.2018) moved up as well during the week to close the week at levels of 11.28/32 and 11.34/36 respectively as volumes traded were rather moderate.
In secondary bill markets, the 364-day bill was seen closing the week at 10.54/57 subsequent to changing hands at levels of 10.55%.
On a more positive note, surplus liquidity in money market remained high at a daily average of Rs. 31.02 billion during the week as overnight call money and repo rates remained steady to record weekly average of 8.73% and 8.10% respectively.
The Open Market Operations (OMO) Department of Central Bank was seen mopping up liquidity on daily basis at WAvg’s ranging from 7.65% to 7.70%. Furthermore, it sold down bills amounting to Rs. 4.5 billion with a maturity period of 18 days at a WAvg of 8.00% as well in an effort to mop up liquidity on a more permanent basis.
Rupee dips marginally during the week
In dollar/rupee markets, spot contacts continued to not be traded as tom contacts and spot next contacts were seen edging lower to weekly lows of Rs. 131.70 and Rs. 131.75 on the back of importer demand. The daily average USD/LKR traded volume for the first three days of the week was at US$ 71.22 million.
Some of the forward dollar rates that prevailed in the market were: One month – 132.55, three months – 134.23 and six months – 136.50.
